NIH boosts the EC in ECS II

Ten months into one of the largest and most complex set of computer contracts ever awarded, the National Institutes of Health is reading promising vital signs for the electronic shopping and ordering services of its Electronic Computer Store II program.

Last September NIH selected 45 prime contractors to participate in ECS II, a $2 billion program offering a wide array of computer equipment and services to federal agencies. Now, after protests and industry consolidation, the number of primes has stabilized at 47. The program had logged $127 million in sales as of May 8, the most recent date for which NIH published ECS II sales figures on its World Wide Web site.

After launching the Web-based ECS II Ordering System June 1, following months of delays, NIH's Information Technology Acquisition and Assessment Center (NITAAC) is prepping it for the last hot weeks of the buying season. Vendors had rejected earlier efforts that demanded they join a central purchasing system and submit regular catalog updates to NIH. Customer feedback after 170 orders has been positive overall, said Everett Carpenter, NITAAC's information technology manager and co-creator of the Web site along with Gaithersburg, Md., software designer Information Flow Inc.

"We looked at our financial data for last year, and 30 percent of the business we did was in the month of September,'' Carpenter said. "We're getting feedback from the customers and vendors [on] how to make the system...the best it can be when September rolls around.''

With so many vendors to choose from, NIH designed the system to save customers the trouble of having to page through nearly four dozen company Web sites to find the products they want or to play telephone tag with sales representatives. Instead, customers go to the

NITAAC site and request items they want from at least three vendors, then vendors post quotes to the closed-loop system. When customers have reviewed the quotes, they pass them on to their contract shops, which handle the evaluations and place the orders.

Because the system does not allow customers to place orders directly from the site, it falls short of a genuine electronic commerce (EC) solution. NIH doesn't have the legal authority to take money from other agencies, so it can't offer this capability, Carpenter said. Nevertheless, he continued, customers can notify NIH and vendors when they want to accept a quote by filling out an online form, thus speeding up fulfillment of their orders once official purchasing documents are filed.

"Most customers, especially during the fourth quarter, are looking for something easy,'' Carpenter said. "They're looking to get the information quickly, and this is a device for doing that.''

As such, the site is geared to buyers who have functional requirements in mind but not specific products. Some customers, however, know exactly what they want and are asking NIH to make it easier for them to identify suppliers., "We are looking at providing other interfaces for our customers,'' Carpenter said

How much business is shifting to the Web isn't clear. Carpenter said he has not been able to analyze sales figures to see what percentage of orders in the past two months have originated online. Contractors who have their own electronic purchasing systems agreed their early experiences with the system were good. Clint Newby, senior director of government sales for CompUSA, said he expected business to grow as users become more familiar with the site.

Jay Jones, an OAO Corp. vice president responsible for ECS II and commercial off-the-shelf product sales for his $250 million corporation, is convinced that American spending patterns will change radically due to EC. For now, however, the "government in totality is struggling" with this new phenomenon.

"I find the government readily accepting electronic commerce once it becomes an established as part of [its] business practice,'' Jones said. "NIH has gone a long way to educate their customers as far as the ease of use and the reliability of it. I think that's starting to sink in.''

Another goal of the electronic shopping and ordering system is to help NIH manage its 47 contractors. When asked how she keeps tabs on so many vendors after managing only 17 in ECS I, Marie Monsees, program director of NITAAC, said, "We are in a continuous improvement mode."

To help her office keep track of sales activity, the online service feeds a database that records what customers are buying whenever they accept a vendor's quote. Meanwhile, the system allows vendors to upload their sales data and generate weekly sales reports.

Although vendors put a more positive spin on the subject of program office performance, ranging from a conservative "NIH has gone through a lot of growing pains" to a gushing "the contract office is fabulous," Monsees does not make light of the burden. The large number of contracts is "a concern," she said, and NIH is "still exploring administrative issues...shifting staff into ECS II...constantly reviewing prices." Tech refresh, she said, is remarkably fast. "One of our marketing goals is 72 hours at most, with 24 hours as the norm. This is a major component of the contract administrator's responsibility."

Carpenter said that thanks to the new system, contract administration is "working better, but there is some room for improvement.'' He said a more complete picture of the effect the system has had on management would emerge within the next several weeks.

Contract usage has been split about equally between defense and civilian purchasers, Monsees said. Elmer Sembly,

NITAAC director of outreach and education, said the center plans to put more emphasis on increasing sales to NIH, which has 23 institutes and centers, each with separate appropriations and the ability to determine what they want to purchase.

Strong Sales

Sales leaders on ECS II have varied from month to month. Worldwide Technologies has done $5.5 million in business to date. According to Joe Koenig, director of federal sales, the company came in seventh out of all the vendors in total volume, and in one recent month, "unlike us, the top six were incumbents from ECS I." An 8(a) company looking for non-8(a) contracts to comply with Small Business Administration guidelines, Worldwide Technologies had $136 million in total 1997 revenue, with about 60 percent in government sales.

Then there is CompUSA, classified by Monsees at one point as "the leader of the pack, with very large quantities." The company recently won a software licensing contract on ECS II worth up to $19.1 million over three years from the Department of Health and Human Services . The company's average order size varies, from small walk-in purchases made by individuals with International Merchant Purchasing Authorization Cards to the huge HHS buy.

CompUSA's Newby said his $5 billion company was attracted to ECS II because it allowed enabled CompUSA to bid services as well as products. "There is not enough money on the product side," Newby said, "and in other contracts we are not able to provide services, such as integration, configuration and training."

OAO's Jones also likes the "availability of total solutions on ECS II." But he believes the stiff competition among so many vendors very often makes price the focus of a sale rather than service levels or product quality.

With so many vendors on the ECS II contract, some may wonder if there is enough business to go around. But, reminds Monsees, "the nature of [indefinite-delivery, indefinite-quantity] contracts allows you to bring business to the table with a strong marketing effort."

"It doesn't matter that there are so many contractors,'' agreed Koenig. "It is really about going out and marketing for the business. It is almost like a GSA program."

Newby, as well, believes a very proactive marketing effort has nailed down CompUSA's success in garnering mostly new customers on ECS II, although name recognition as a commercial retailer may help. "There is so much business opportunity," he said. "It is up to us to make the most of that. It is the marketing effort that makes the difference, not the number of vendors."

Robert Guerra, an IT consultant and president of the Armed Forces Communications and Electronics Association's Bethesda, Md., chapter, which includes NIH, thinks this is the major difference between ECS I and ECS II. "The old ECS had a less dramatic marketing effort. There were some advantages over the GSA schedule. Now, there is almost unlimited competition. Almost anyone can become a vendor." On the other hand, "relative to the GSA schedule, there are only 47 vendors instead of 1,300," Guerra said.

Future Plans

One initiative that may drive ECS II sales is the addition of leasing and seat management services. Monsees said NIH is "exploring leasing language and regulations." However, to do that, NIH will need full support from the ECS II primes. "ECS was designed as a purchasing vehicle for the outright buy, and this would be a bilateral modification to the contract,'' she said. "We have to acquire 47 signatures. Without 100 percent of vendor signatures, we can't make the change."

Roxann Gardner, CompuCom Systems Inc.'s account manager for ECS II, sees leasing in terms of a "paradigm shift," as more agencies seek this capability. As an example, she cited the need of customers to outsource help-desk functions due to downsizing and other factors.

"This market is ready to explode," she said, "but smaller companies may not be set up for this. It is a tremendous effort to manage these assets; vendors will have to gear up or this will hurt their credibility."

-- Kaulkin is a free-lance writer based in Washington, D.C.